Section A:
Required
1. What non current assets would you expect to see on the statement of financial position of BHP Billiton?
2. What current assets would you expect to see on the statement of financial position of BHP Billiton?
3. How has the corporate strategy described in this article affected the statement of financial position of BHP Billiton?
4. How would you record the purchase of a non current asset using a system of debits and credits?
5. If a non current asset is purchased for 30 000, should this amount be charged to the income statement? Give your reasons for this answer.
6. Why would it not be correct for BHP Billiton to value its non current assets at historic cost?
Total marks for Section A: 4 marks
Section B:
Trial Balance as at 30 April 2014
Sales 38 000
Purchases 11 000
Inventory 1 May 2013 3 000
Salaries and Wages 2 000
Motor expenses 1 000
Rent 1 500
Motor vehicles 40 000
Land and buildings 25 000
Provision for depreciation
of land and buildings 1 May 2013 1 250
Accounts receivable 2 000
Accounts payable 500
Cash 20 650
Interest on loan 1 600
Long term loan 40 000
Drawings 2 000
Capital 30 000
109 750 109 750
Required:
The following trial balance was extracted from the books of K West on 30 April 2014.
1. From the trial balance and the notes below prepare the income statement for the year ending 30 April 2014, and a statement of financial position at that date.
2. Produce a T account to show the accumulated depreciation of the land and buildings
Notes:
1. Closing inventory is valued at 10 000
2. Depreciation of the land and buildings is calculated at 5% cost using the straight line method
3. The motor vehicles were purchased in the financial year 2013 / 2014, K West has decided not to make any adjustment for depreciation
Section C:
The financial statements need to be redrafted after discussions between K West and his accountant
K Wests accountant is unhappy with the financial statements for two reasons:
1. He believes that the closing inventory has been overvalued and that the correct valuation is 4 000 and not 10 000
2. He believes that the motor vehicles have lost value during the course of the year. He believes that K West needs to make a depreciation charge for the year of 25% using the reducing balance method
Required:
1. Redraft the income statement and statement of financial position taking into account the new stock valuation and the depreciation charge for the motor vehicles.
2. Produce a T account to show the accumulated depreciation on the motor vehicles (2 marks)
3. From the point of view of a shareholder state how the redrafted financial statements are different from the first set of financial statements.